I was planning on writing a longer form thesis just focusing on BSC, but I found one written by defisurfer808 here, so just wanted to share some short thoughts on BSC and ARB.
Why BSC interests me, even though Ethereum and Layer 2’s have most of the attention:
Ethereum becomes too expensive at some point. Users tend to switch to alternative L1s past this point. (This likely also happens because we move out on the risk curve) [note: Instead of moving to L1s, L2s will likely get a majority of attention when this happens this cycle]
Although L2s will likely benefit from Ethereum becoming too expensive, there is a lot of fragmentation between them. Although Arbitrum seems like the clear winner currently, later in the year zk-rollups might become more and more popular, since they’re newer and are meant to be superior tech-wise.
Although playing alternative L1s is not necessary, I think not keeping an eye on them can lead to lots of missed opportunities.
Here’s a short (really short) overview of why I am excited about BSC.
BSC
Need to preface this one with a two assumptions before starting:
Assumptions:
Binance as an exchange does not go down/under
Regulators do not exclusively target Binance and CZ
Thesis:
CZ will invest, promote and incubate more and more legitimate DeFi products on BSC.
Other L1s are relatively dead (at least attention wise):
Avalanche struggling to make headlines
Solana struggling altogether
Polygon has some wind behind it but I have not seen anything particularly interesting on Polygon yet (aside from the millions they’ve spent on
promotionspartnerships).
L2s are good but people will still use L1s, especially if developers and money is on L1s.
BSC is more popular in Asia, Asians are bidding.
BSC has had strong fundamentals over the last year:
Higher daily active addresses:
Higher fees and revenue:
We can also look at daily transactions, but these are often inflated (from what I’ve seen). Lower fee chains tend to have higher transactions, and these are not necessarily organic etc.
BSC DeFi:
The most important reason that I want to focus on BSC is because it feels like there’s a shift in the DeFi scene over at BSC. Recently, a few interesting products have launched. Couple of examples of these are Thena and Level. Thena is a ve(3, 3) community DEX, and Level Finance is a perp trading platform. Both have done well in attracting TVL, albeit the last few months we’ve seen increased on-chain activity.
Both are forks, Thena of Solidly, Level of GMX, but they are legit, they generate fees and most importantly, they show a shift in BSC developer activity (in my opinion) away from goofy products towards more proper DeFi.
This type of building is a flywheel in itself. Thena gaining $172m TVL over and rising to number 5 on TVL rankings has two important impacts:
Forces already existing DeFi protocols to revamp, improve and grow. An example of this is PancakeSwap moving to release v3 in April, to introduce lower fees and higher incentives. (source)
Leads to other developers launching interesting and legitimate projects on BSC. This can be further bolstered by Binance Labs’ (and CZ’s) incubation and support.
ARB Token:
Simple Comparables Analysis
Further thoughts on Arbitrum and $ARB:
It is difficult to value anything very seriously in crypto, since they don’t mix well with traditional models. They are determined more by sentiment and narrative (much like retail stocks are in traditional finance)
In my opinion, as someone who has used both extensively, Arbitrum as a Layer 2 is superior to Optimism. Arbitrum has more interesting protocols (Y2K (my favorite), Camelot, Sentiment, Premia). Optimism is a bit limited in this sense.
Arbitrum beats Optimism in terms of daily active addresses, daily transactions, revenues, fees, total DEX volume and TVL. (However, it is likely that the differences between the two are much smaller in reality, given that Arbitrum likely had increased activity and engagement due to airdrop farming and speculation)
I’ve seen many people compare Arbitrum to Polygon. I don’t think this is a fair comparison. Not just because Polygon isn’t an L2 (even though the market and participants think of it that way), but because MATIC can be used as gas fee, when Arbitrum cannot. I think the best way to compare Arbitrum is using Optimism, since they are highly comparable (tokens have same function and mostly the same characteristics, except Optimism has less of its supply circulating).
None of this is financial advice, please do not take it as such.